US budget deficit jumps, no end in sight; China ODI falls -45%, HNA pulls back sharply; China trade grows strongly; Aussies target advisers to black economy; UST 10yr yield at 2.34%; oil up, gold unchanged; NZ$1 = 73.2 US¢, TWI-5 = 77

Here’s my summary of the key events overnight that affect New Zealand, with news Australia is taking aim at the behaviour of corporate tax lawyers and accountants.

But first in the US, their Federal government ran a budget deficit in June amid higher government spending and steady revenues. Government spending exceeded revenues by US$90 bln last month. The deficit was about US$96 bln higher than it was in June 2016, when their government recorded a US$6 bln surplus. Not only are they going backwards on the budget now, new analysis shows that with the new Administration’s plans, things will not improve materially either – if it can be implemented. The promised ‘balanced budget’ is nowhere in sight. And improved economic growth is not on the horizon either.

China’s non-financial outbound direct investment dropped -45% to NZ$66 bln in the first half of the year from the same period a year earlier, according to state-run Xinhua News Agency, which cited data from the Ministry of Commerce. That drop is being reflected is the sudden halt of deals being done at HNA, one of its most prolific overseas acquirers. But the word is that deals already agreed – like their takeover of UDC via their wholly-owned TIP Trailer Services – will be completed

In data released early this morning, China’s trade surplus came in unchanged for June from May. But there was a surprisingly strong rise in both imports and exports. Their export trade levels grew +11% from the same month a year ago, and imports were up +17% on the same basis. These are strong signals their economy is gaining momentum. A part of this is new data that suggests China will import more than 1 bln tonnes of iron ore this year.

In Australia, there are calls to rein in the activities of accountants and lawyers who give tax avoidance advice, and especially those who create the vehicles for their clients to do so. They have a Black Economy Taskforce, and the head of that said tax agents are either assisting their clients make fraudulent claims, or are blind to techniques and systems used in the black economy. Essentially they are questioning the ethical behaviour of corporate tax lawyers and tax accountants, claiming they regularly cross the line.

In New York, the UST 10yr yield has risen today and is now at 2.34%.

The price of oil has also risen and is now at just over US$46 a barrel, while the Brent benchmark is now just on US$48.50. The IEA says the oil market could stay oversupplied for longer than expected due to rising production and limited output cuts by some OPEC exporters, especially Nigeria and Libya. The IEA also says that demand for oil is rising.

The price of gold is basically unchanged at US$1,217/oz.

And the Kiwi dollar has recovered further and is now up ½ cent at 73.2 USc. On the cross rates we are at 94.7 AU¢, and at 64.2 euro cents. The TWI-5 index is back at 77 and close to a three month high.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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